Payment under protest during assessment counts towards mandatory pre-deposit for filing GST appeal

Payment under protest during assessment counts towards mandatory pre-deposit for filing GST appeal

Issue

Whether an amount paid “under protest” by an assessee during the course of assessment proceedings (investigation/adjudication) can be adjusted towards the mandatory 10% pre-deposit required under Section 107(6) of the CGST Act for filing an appeal.

Facts

• Assessment Proceedings: The Department initiated proceedings against the petitioner (Getronics Solutions India Pvt. Ltd.) under Section 74 of the CGST Act for the tax period July 2017 to March 2020.

• Payment Under Protest: During the pendency of these proceedings, the petitioner made a payment of ₹1,99,10,490/- specifically marking it as “under protest”.

• Total Demand: The final assessment order raised a total disputed tax demand of ₹11,15,72,010/-.

• Appeal Filing: The petitioner filed an appeal before the Appellate Authority under Section 107. The mandatory pre-deposit required (10% of disputed tax) was approximately ₹1.11 Crore.

• Rejection of Appeal: The Appellate Authority rejected the appeal, refusing to treat the ₹1.99 Crore paid “under protest” as the statutory pre-deposit, insisting on a fresh 10% deposit.

• Petitioner’s Plea: The petitioner contended that since they had already deposited an amount exceeding 10% of the disputed tax, albeit under protest, the requirement of Section 107(6) stood satisfied.

Decision

• Statutory Interpretation: The Karnataka High Court observed that Section 107(6) requires the appellant to pay 10% of the “remaining amount of tax in dispute”. It does not explicitly exclude payments made prior to the appeal order if they are relatable to the disputed tax.

• Validity of Protest Payment: The Court held that the label “under protest” does not diminish the nature of the payment. It is a deposit available with the Revenue that covers the liability if confirmed.

• Excess Payment: Since the amount paid under protest (₹1.99 Crore) was significantly higher than the required 10% (₹1.11 Crore), the statutory condition was fully met.

• Rejection Unjustified: The Appellate Authority’s refusal to adjust this amount was deemed incorrect. The Court emphasized that taxing statutes must be construed strictly, but not in a way that defeats substantive rights on technical grounds.

• Order: The impugned order rejecting the appeal was set aside. The Appellate Authority was directed to accept the “protest payment” as the pre-deposit and hear the appeal on merits.

Key Takeaways

Protest Payment = Pre-deposit: Amounts paid by an assessee during investigation or assessment “under protest” are eligible to be adjusted against the mandatory pre-deposit for appeals.

No Double Payment: Taxpayers are not required to pay a fresh 10% at the appeal stage if they have already deposited an equivalent or higher amount during the proceedings, provided it is unutilized and available with the Department.

Strict Construction: Procedural requirements for appeals (like pre-deposit) should not be interpreted so rigidly that they render the right of appeal illusory for compliant taxpayers.